Global Sales Tax Compliance and Remittance (For SaaS Companies)
Outseta is addressing global sales tax compliance challenges for its SaaS business and customers. The choice between using a Merchant of Record or acting as one depends on individual business needs.
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Over the past 18 months, Outseta has grappled with the complexities of global sales tax compliance, a challenge not only for their own SaaS business but also for their customers. The author, Geoff Roberts, reflects on the lack of effective solutions available in the market, leading to a state of inaction. He discusses the role of a Merchant of Record (MoR), which is the entity responsible for processing transactions and remitting taxes. While many SaaS companies, including Outseta, operate as their own MoR, this approach can be burdensome, particularly for smaller businesses. The rise of third-party MoRs like Paddle and Gumroad offers convenience by handling tax calculations and remittances, but comes with its own set of risks and costs. Roberts emphasizes that the decision to use a MoR or act as one depends on individual business circumstances, weighing the pros and cons of each option. He highlights the administrative ease of using a MoR against potential customer confusion and platform risks, where businesses could be penalized for issues beyond their control. Ultimately, he advocates for a balanced approach, recognizing the nuances involved in global sales tax compliance and the need for tailored solutions for different business models.
- Outseta is exploring solutions for global sales tax compliance for their SaaS business and customers.
- The role of a Merchant of Record (MoR) can ease tax burdens but introduces risks and higher fees.
- The decision to use a MoR or operate as one depends on specific business needs and circumstances.
- There are significant risks associated with third-party MoRs, including potential penalties for unrelated issues.
- A balanced approach is necessary to navigate the complexities of global sales tax compliance.
2 commentsSecondly, yes many companies haven't paid their sales taxes for years and nothing bad has happened to them but the governments around the world are not stupid. They can see that they are only getting a small % of what they should be getting so I am expecting that things are going to change pretty rapidly.
Why? Simple, most governments today are broke. Living on debt and saddling future generations with more and more debt each year. Do we really think that they are just going to sit back and relax and watch companies around the world not pay their fair share?
And by companies around the world, I don't mean Apple or Google, I am talking about the small companies, the Shopify stores, the little SaaS just starting out. Apple and Google can fight and delay and financial engineer their way out of this but the small mom and pop shops won't be.
Case and point Stripe just bought Lemon Squeezy. If the MOR model was not needed, if paying sales tax was optional as it was pointed out in this article, why would Stripe bother purchasing this company?
My take is that the days of being a cowboy selling stuff on the internet while "forgetting" to collect the sales tax that is owed are over or will be over soon.
Governments can see that internet companies are making a lot of cash and they want what is owed to them. Should they make it simpler to collect and remit the taxes? Absolutely. But lets call a spade a spade. If you are supposed to collect the sales tax and pay it, and you don't do it, then you are cheating, plain and simple.
We are always rightfully asking governments to tax the companies that offshore their profits like the FAANG companies do, so why should we encourage people to cheat then? Isn't that hypocritical?
Is that technically correct?
I thought with Stripe, they are the merchant and you’re technically just a sub account to them.